Maximum Diversification Benefit Can Be Achieved If One Were to Form

question 141

Multiple Choice

Maximum diversification benefit can be achieved if one were to form a portfolio of two stocks whose returns had a correlation coefficient of:

• A) -1.0
• B) +1.0
• C) 0.0
• D) none of the above

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Definitions:

Sense of direction

An understanding or intuition of how to proceed in a particular situation.

Negotiation Planning

involves preparing strategies and objectives before entering into negotiation talks to better position oneself for favorable outcomes.

BATNAs

A reiteration emphasizing the importance of understanding one’s best alternatives to a negotiated agreement as crucial leverage in negotiations.

Distributive process

The method through which resources or outcomes are allocated among parties, often implying a zero-sum scenario similar to distributive bargaining but with a broader application.